As seen on The Wall Street Journal

LIMA, Peru—Peru is pushing ahead with measures to shore up private investment and boost growth despite concerns the changes could weaken environmental oversight in major sectors like mining and energy.

The government, which announced the proposals earlier this month, seeks to relax environmental rules by temporarily reducing fines and speeding up the approval process for permits.

However, the measures are facing stiff criticism from environmentalists, who say they will reduce the Environment Ministry’s responsibilities in regulating mining and energy activities. Representatives from the ministry weren’t immediately available for comment.

“This is a major setback for Peru’s environmental advances,” said José de Echave, a former deputy environment minister.

Efforts to strengthen environmental rules for mining and energy companies are relatively new in Peru. The country created the Environment Ministry in 2008 as a condition for signing a free-trade agreement with the U.S.

The most contentious proposals include plans to reduce fines by the country’s environmental regulator, known as OEFA, over the next three years and impose a maximum period of 30 days for the approval of environmental impact studies.

These approvals now can take up to two years, depending on the size and complexity of a project.

The government’s proposals were approved by a congressional committee late Wednesday, and are expected to be sent to Congress’ general assembly for approval in the next few days.

A group of more than 30 nongovernmental organizations have urged lawmakers to reject the proposals. The Peruvian Society of Environmental Law this week sent a letter to President Ollanta Humala saying that the measures would weaken the country’s environmental laws and institutions.

But government officials say the measures are important to ensure economic growth. “We believe that these regulations are going to help our economy to continue to grow and to create employment,” Finance Minister Luis Miguel Castilla told reporters this week.

The package also includes new tax incentives for mining projects and proposals to reduce labor costs.

The government has said measures could add up to 3 percentage points to economic growth in the next three years and help restart investment projects for about $11 billion. The proposals also come ahead of plans to launch an auction of oil and gas contracts in the Amazon region and at offshore sites.

Mr. Castilla announced the proposals earlier this month following the release of data showing that Peru’s economy expanded just 2% in April, the slowest monthly rate since 2009.

Economic growth has slowed in recent months in large part due to a decline in investment and exports. The economy expanded 5% in 2013, compared with 6.3% in 2012 and 6.9% in 2011.

Economists expect growth of around 5% or less in 2014, compared with previous forecasts of more than 6%. The outlook has been dampened by weak investment and lower-than-expected output in the mining sector.

Private-sector investment was a main driver of Peru’s robust economic expansion during the past decade. But growth has slowed in recent months as investment has been hurt by a decline in prices for commodities like copper, the country’s top export earner.

The government’s push has been widely supported by Peru’s business community, which has often complained the current environmental rules are too strict and red tape is one of the main sources of project delays.

“This is a question of confidence,” Compañía de Minas Buenaventura SA Chief Financial Officer Carlos Gálvez, said in a telephone interview. “Speeding up the process for environmental issues will help investors and speed up their investments.”

Original article: Peru’s Economic Proposals Trigger Environmental Concerns